Commission Approves Postage Increase to Thirty-Three Cents

By Bill McAllisterThe Washington PostWASHINGTON

The U.S. Postal Service won permission Monday to increase the price of a
letter to 33 cents, a one-cent hike that postal regulators said they doubt
the agency, which has rung up annual profits of more than $1 billion for
three years running, needs before January "at the earliest."

At the same time, regulators cut the agency's requested rate increases
for bulk mailers, reduced rates for heavy first-class letters and increased
postage rates for periodicals and newspapers.

Members of the independent Postal Rate Commission expressed concern that
the cash-rich Postal Service had "seriously misestimated its need for a
rate hike," but "reluctantly" approved the requested hike nonetheless.
Chairman Edward J. Gleiman said the panel endorsed the increase because it
had no legal basis to challenge the agency's multiyear billion-dollar
spending program that underpinned the request.

Just when the new rates will be imposed will be up to the Postal
Service's Board of Governors, a presidentially appointed panel that
oversees the nation's mail service.

Some senior postal executives have said they will pressure the
governors, who meet June 2, to impose the new rates as soon as possible,
perhaps within 90 days. In private sessions with the governors, they have
argued that the agency could "crash and burn" unless it quickly spends
billions on new equipment to successfully compete with the growing
competition from e-mail and other forms of electronic communications.

At a news conference announcing the decision, Gleiman pointedly
questioned whether the agency could spend the $720 million for new
equipment it has budgeted for this year, because it has spent only $116
million thus far.

The rate commission did not give the Postal Service a number of
increases it wanted, lopping one-third off the $2.4 billion in new revenue
it sought. The commission said it cut that much off because the agency has
failed to properly calculate "the benefits of lower-than-expected
inflation" since it filed its request in July. "The commission believes
that the Postal Service is unlikely - in the absence of either the economy
going into free fall, a spending binge or some very creative accounting -
to incur any of the $1.4 billion loss it projected for fiscal year 1998,"
Gleiman said.

Indeed, Postmaster General Marvin T. Runyon has said the agency should
make more than $1 billion this year as well.